Wednesday, April 3, 2013

Someone over at Babson College Entrepreneurship Center (cutely called, BEEP), has the right idea about entrepreneurship ecosystems. Here are their 10 rules (reprinted) for entrepreneurship ecosystems. A lot of wisdom here, I'll have to return to this to comment in more depth.

Stop emulating Silicon Valley! Even Silicon Valley
could not create itself today if it were starting from scratch. Give up
on thoughts of a “knowledge-based society” or “the information economy.”
You don’t need to tell entrepreneurs that they need to use Internet and
mobile technologies anymore than you need to tell them to use water or
electricity.

Tailor an ecosystem around your own particular characteristics. Sustainable entrepreneurship is the result of numerous forces working together, which we call the entrepreneurship ecosystem.
Each region has a unique ecosystem with more than a dozen elements.
Are there large companies that are used to interacting with small,
innovative suppliers? Are there markets close by? Is the human capital
technical in orientation? Does the culture support risk taking and
innovative, contrarian thinking? Is leadership overtly and clearly
supportive of entrepreneurship? You need to understand all of them, and
how they can be strengthened and aligned.

Engage the entrepreneurship stakeholders early on.
Entrepreneurship is about engagement and empowerment. Stakeholders
should be engaged early in the process. This includes the various
segments of the private sector, educational leaders, community leaders,
government officials, entrepreneurship development organizations,
leaders of diaspora networks, university officials, investors and
lenders, and so on. In some communities the cooperatives, unions, and
even religious organizations are influential. There are many ways to
engage, but ongoing, sincere, open dialog is the most important starting
point.

Support the high potential entrepreneurs. Although
entrepreneurship is inclusive, to jumpstart an entrepreneurship
ecosystem, the most impactful sector to influence is the high ambition,
growth oriented, market-seeking ventures. These create the jobs, the
dynamism and vitality, and the growth.

Get some visible successes, even by “brute force” if necessary. Success
breeds success. Endeavor [LINK TO http://www.endeavor.org/ ] has built
its entire strategy around this principle, finding and nurturing “high
impact entrepreneurs.” This happens because: (a) successful
entrepreneurs like to help other entrepreneurs; (b) successful
entrepreneurs become angel investors; (c) successful entrepreneurs make
excellent board members; (d) success inspires latent-entrepreneurs to
take the leap; and, (e) successful entrepreneurs become powerful voices
for governmental reform. According to the law of small numbers:
it only takes a few successes to change the entire game. But when you
see some successes on the horizon, make sure you celebrate them! Give a
medal, an award, make them visible.

Change the culture head on. Many leaders believe
that this takes generations, and although much societal change is long
term, there are certain social norms that can be changed in a few years:
it is possible to increase tolerance for risk, the legitimacy (even
nobility) of launching your own business, acceptance for honest failure.
Media campaigns, annual events, and awards all help. Just think if you
ran an entrepreneurship campaign as seriously as your own campaign for
re-election?

Stress the roots: don’t provide easy money. Early
stage capital is always scarce, everywhere. But moving to the opposite
extreme is equally disastrous. Provide funding, but insist that the
entrepreneur bring in a matching investor. Keep the funding off the
ventures’ balance sheets. Make sure the funds are not equity: government
has no business selecting and nurturing winners. Directly incentivize
the financial intermediaries, not the ventures themselves: make it
easier for banks, private equity, angel investors, family businesses,
and leasing companies to invest in the ventures themselves. Don’t be an
evergreen financer: figure out a way to start the private financing
markets, and get out, or focus on the highest risk areas.

Pave the footpath. Don’t push clusters too hard.
Every government now has a cluster strategy and thinks that will get
entrepreneurship going, but success is elusive and rare. Clusters don’t create entrepreneurs. Entrepreneurs create clusters.
Mike Porter said that in 1999, only no one listened. Watch where the
entrepreneurs are walking, and then pave the footpath. Remember,
entrepreneurship is inherently a contrarian activity, so wherever you
decide they should be, the good entrepreneurs will always be figuring
out how to do something else, do it differently, and do it better.
Identify, watch, encourage, support.

Remove bureaucratic obstacles for entrepreneurs.
Eliminate roadblocks and red tape through consolidation and
streamlining. Redeploy the dozens or hundreds of clerks whose seats
depend on their ability to slow everything down. Have permitting
“bootcamps” to free up log jams. Make regulations transparent and
provide tools for entrepreneurs to address them. Get rid of outmoded
obstacles to redeploying people–support and retrain the unemployed
rather than preventing their firing. Make sure tax collections are
rigorous, fair, but entrepreneur-friendly. As a government purchaser,
buy from small suppliers, but make sure you pay on time: nothing is as
demotivating as doing a good job as a new company, and waiting three
months to get paid: this is absolutely unforgivable and has a huge
dampening effect on entrepreneurship.

Experiment relentlessly and holistically. You can
learn from what others have done around the world, but you have to
experiment based on your own reality. Focus initially on short run
experiments, small scale funding, short courses, and small numbers of
entrepreneurs. Develop a norm of reflecting and learning from mistakes
as well as successes. But don’t expect piecemeal action to work: you
need to move different elements of the ecosystem simultaneously. To use a
simple example, creating private equity will be self-defeating if there
is no high potential deal flow for investors to invest in, and ways for
them to realize (“exit”) their investment.

About the Blogger

Sean has spent half a decade working in innovation policy and management. At the Center for American Progress, Sean's policy reports were featured in congressional hearings, legislation, and presidential speeches. Sean was also a founding partner at Canterbury Road Partners, a boutique consultancy dedicated to helping universities understand and monetize intellectual property assets and take new technology to market.